InvestorQ : Is it true that the American economy has witnessed negative growth in the June 2022 quarter?
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Is it true that the American economy has witnessed negative growth in the June 2022 quarter?

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Juvina Maggie answered.
1 month ago
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That is correct. After all the estimates and the guesstimates, the final figure is out. The US economy has contracted by -0.9% in the June 2022 quarter. This comes on top of a -1.6% contraction in the March 2022 quarter. Technically, the US economy is in recession, although the US policy makers are yet to accept it and they have blamed it purely on high inflation. The reasons are obvious. Ever since the US central bank embarked on a relentless hawkish drive, the inflation may not have been curtailed but growth has surely been curtailed with consumption spending the worst hit among the macro variables.

Consumer spending, the big driver of US growth, stayed positive but slowed to 1%. Also, residential fixed investments dropped 14% while the slowing business inventories show goods produced but not yet sold. All these were a drag on GDP. Interestingly, the Fed and even Biden appear to be confident that the policy is on the right track. In fact, Fed hiked rates by another 75 bps in September and November could see between 50 bps and 75 bps. For now, the US economy is a paradox with the jobs market very strong but deep pressure on the global supplies and the Russia Ukraine war is only worsening things.

As the pain on growth prolongs, the Fed may sound less credible and more adamant. For now, it looks like price stability only.

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